Beijing must make fighting pollution its priority
Market observers were quick to draw a connection between Beijing's announcement of record spending and a prompt surge in the Dow Jones Industrial Average to a new peak. That shows how much the global economy looks to China for growth amid Europe's debt woes and a weak recovery in the US. To be sure, the Dow's rise also reflects large doses of stimulus from US and European central banks, low interest rates and, not least, positive investor sentiment about the future prospects of the American market and companies, despite lingering high unemployment. But it underlines the importance markets attach to sustainable growth and economic management in China.
They have reasons to be happy with the Ministry of Finance's budget report to the National People's Congress. It plans a record national budget deficit of 1.2 trillion yuan (HK$1.5 trillion), or about 2 per cent of gross domestic product - up 50 per cent on last year's deficit of 800 billion yuan. Outgoing premier Wen Jiabao told the congress increased spending was needed to ensure and improve public welfare and maintain support for economic growth and structural adjustment. This is code for the task of addressing unbalanced development and putting the economy on a sustainable growth path, by shifting the emphasis away from fixed-asset investment and exports and towards domestic consumption.
Though a record, the planned deficit is much lower than in major developed countries and has been well received by market commentators. One said, rightly, it was supportive of pro-consumption expenditures like social security, health care and education. After all, consumers cannot be expected to increase discretionary spending if they are building personal savings for health care, education and their old age.
In his final work report, Wen delivered a special warning to the country's new leaders on the environmental consequences of unsustainable growth policies. That would have resonated with the people of Beijing, and other parts of the country, who suffered under blankets of foul smog during January. Of all the political and economic reforms China needs, tackling pollution is the one least likely to challenge the authority of one-party rule and the one most likely to attract unequivocal public support. The new leaders should heed Wen's parting words with concrete action to clean up China's air, earth and water.